Friday, November 22nd, 2024

Asia Market Outlook: Strong Earnings Growth, China Recovery, and Top Stock Picks





Regional Morning Notes: Comprehensive Financial Analysis of Leading Companies

Regional Morning Notes: Comprehensive Financial Analysis of Leading Companies

Broker: UOB Kay Hian

Date: Thursday, 07 November 2024

GREATER CHINA

Internet – China

The initial phase of the 11.11 campaign exhibited revitalizing momentum for the Internet sector in China. Key companies such as Alibaba and JD.com spearheaded this momentum with significant year-on-year growth in various segments. For instance, gaming laptops saw a remarkable 120% increase in sales. JD’s offline channels, including JD Mall, experienced over 100% year-on-year growth in sales. The home appliance sector also thrived with brands like Xiaomi and Haier doubling their sales.

Alibaba (9988 HK)

Recommendation: BUY

Share Price: HK\$96.2

Target Price: HK\$130

Alibaba is maintaining its momentum with a target price of HK\$130.00, which implies a 15.6x FY25F PE, below its historical mean of 21x. This favorable outlook is driven by strategic implementations by Taobao Tmall Group (TTG) to bolster monetization in the second half of 2024. Currently, Alibaba is trading at 10.6x FY25F PE, 1.2 standard deviations below its historical mean.

JD.com (9618 HK)

Recommendation: BUY

Share Price: HK\$152.0

Target Price: HK\$197

JD.com is set to achieve a target price of HK\$190.00, implying a 12.3x 2025F PE, below its historical mean of 22x. Despite a subdued outlook for the second half of 2024, JD is committed to enhancing its 1P supply chain with lower procurement costs and enriching 3P merchants and white label products. JD currently trades at 10.3x 2025F PE, 2.2 standard deviations below its historical mean.

INDONESIA

United Tractors (UNTR IJ)

Recommendation: HOLD

Share Price: Rp27,750

Target Price: Rp30,000

United Tractors delivered a strong performance in 3Q24, driven by high gold prices. The sales of Komatsu exceeded expectations, leading to higher-than-expected earnings. The company saw a 21% rise in gold prices to US\$2,330/t.oz in 9M24, with an average of US\$2,475/t.oz in 3Q24.

MALAYSIA

CIMB Group (CIMB MK)

Recommendation: HOLD

Share Price: RM8.20

Target Price: RM8.12

CIMB Group remains optimistic about hitting its 11.0-11.5% ROE targets, driven by stable net interest margin (NIM) and non-interest income growth. However, the positive growth trajectory is already priced in, with CIMB trading at +1SD above its 10-year historical mean PBV. Key 2024 targets include an ROE of 11.0-11.5%, loans growth of 5-7%, and a net credit cost of 30-40bp.

Fraser & Neave Holdings (FNH MK)

Recommendation: BUY

Share Price: RM30.74

Target Price: RM36.30

Fraser & Neave Holdings remains committed to its dairy project, despite a 6-12 month delay. The impact of this delay is largely neutral. The company continues to manage costs effectively, maintaining a BUY recommendation with a target price of RM36.30. This target is based on a discounted cash flow model, implying a 23.8x FY25F PE.

SINGAPORE

Frasers Logistics & Commercial Trust (FLT SP)

Recommendation: BUY

Share Price: S\$1.05

Target Price: S\$1.44

Frasers Logistics & Commercial Trust reported strong growth in 2HFY24, propelled by logistics properties and rental reversion. The trust continues to benefit from favorable market conditions and robust demand for logistics space.

Singapore Post (SPOST SP)

Recommendation: BUY

Share Price: S\$0.520

Target Price: S\$0.610

Singapore Post posted a higher core PATMI in 1HFY25, driven by increased contributions from the Australia and Singapore businesses. Despite headwinds in the international business, SPOST declared a higher interim dividend, reflecting strong performance.

SIA Engineering (SIE SP)

Recommendation: BUY

Share Price: S\$2.45

Target Price: S\$2.70

SIA Engineering reported a slight miss in 1HFY25 core net profit due to supply chain constraints and gestation costs related to new business expansion. The company is investing for long-term growth and maintains a positive outlook.

CapitaLand Investment (CLI SP)

Recommendation: BUY

Share Price: S\$2.91

Target Price: S\$3.85

CapitaLand Investment is executing well operationally but remains cautious about 2025. The target price has been lowered to S\$3.85, reflecting a more conservative outlook. Positive news on asset recycling and policy support could provide upside to the share price.

THAILAND

Impact from Trump’s Policies

The industrial estate, electronics, and renewable energy sectors in Thailand are expected to benefit from the trade war between the US and China. Top picks include AMATA, BANPU, DELTA, STGT, and WHA. Conversely, petrochemical, packaging, and food exporter sectors may face negative impacts due to lower demand from China and tariffs on US imports.

PTT Global Chemical (PTTGC TB)

Recommendation: HOLD

Share Price: Bt26.25

Target Price: Bt24.50

PTT Global Chemical reported a net loss in 3Q24 due to a significant impairment loss. The company’s upstream business remained strong, but the olefins business posted flat EBITDA. The outlook for 4Q24 remains challenging, with continued pressure from shrinking petrochemical spreads.

CH Karnchang (CK TB)

Recommendation: BUY

Share Price: Bt19.10

Target Price: Bt26.50

CH Karnchang is expected to report strong year-on-year and quarter-on-quarter growth in 3Q24, driven by contributions from CK Power and reduced losses from Luang Prabang Power Company Limited. The company’s robust backlog supports a positive earnings outlook.

Minor International (MINT TB)

Recommendation: BUY

Share Price: Bt27.25

Target Price: Bt38.00

Minor International is projected to deliver strong year-on-year growth in core profit for 3Q24, fueled by robust hotel performance in Europe and Thailand. The company’s strategic adaptability and cost control measures support a positive outlook.

KEY INDICES

Key indices showed mixed performance, with the DJIA, S&P 500, and FTSE 100 experiencing gains, while the CSI 300, HSCEI, and HSI faced declines. The overall market sentiment was influenced by various macroeconomic factors, including trade tensions and policy decisions.

TOP PICKS

  • Anta Sports: BUY with a target price of HK\$132.30
  • Bank Tabungan Negara: BUY with a target price of Rp1,740.00
  • Yinson: BUY with a target price of RM3.90
  • OCBC: BUY with a target price of S\$19.40
  • CP ALL: BUY with a target price of Bt84.00
  • Major Cineplex: BUY with a target price of Bt19.00

KEY ASSUMPTIONS

GDP growth forecasts for various regions were provided, indicating moderate growth across the US, Euro Zone, Japan, Singapore, Malaysia, Thailand, Indonesia, Hong Kong, and China. Commodity prices, including CPO and Brent crude, were also projected, reflecting expected market trends.

CORPORATE EVENTS

Several corporate events were highlighted, including virtual meetings and roadshows for companies such as Valuetronics Holdings, Prima Marine Public Company Limited, and Prime US REIT. These events provide opportunities for investors to gain insights into company strategies and performance.


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